Investments Trade Log
Re: Investments Trade Log
@Seppia
Bankai's point is that it's not uncommon for companies that don't have adequate free cash flow to pay out dividends take on debt to sustain the dividend. It's not "hidden", but if you're using dividends alone as a proxy for sustainable free cash flow because they "can't be faked" you will sometimes be mislead in periods of declining cash generation. This is a tale as old as time: dividend payout ratio increases up to 100% and beyond as the management stubbornly clings to the dividend in the face of reality. HBI might be a relevant present example.
So sure, a dividend proves the company has adequate short-term cash reserves to pay out the amount of the dividend...but that doesn't mean it's sustainable. And given the % of dividend received to the stock price, it's not that much comfort. It may prove it's not a total fraud, but that doesn't mean total future returns will be good as the stock price eventually falls in line with the falling earnings and ultimate dividend cut.
I know @jacob isn't advocating one ignore these other considerations, but along with the dividend yield, super simplistically you'd want some comfort that the payout ratio is sustainable via a sustainable revenue and cost situation...which ultimately gets back to my point that dividend yield is just a proxy for free cash flow, and used alone can lead you astray.
What Works on Wall Street is a great book and covers factor-based investing, but for individuals who are picking individual stocks I think that a very large focus on the yield to the exclusion of all else is highly problematic...as is very large focus on any single variable. Investing is a multivariate problem and I don't think anyone thinking clearly about it can come to the conclusion that 1-2 variables alone are enough to produce strong risk-adjusted returns when picking individual stocks (it works better in a more diversified group, as the book demonstrates through thorough study of long-term data).
Bankai's point is that it's not uncommon for companies that don't have adequate free cash flow to pay out dividends take on debt to sustain the dividend. It's not "hidden", but if you're using dividends alone as a proxy for sustainable free cash flow because they "can't be faked" you will sometimes be mislead in periods of declining cash generation. This is a tale as old as time: dividend payout ratio increases up to 100% and beyond as the management stubbornly clings to the dividend in the face of reality. HBI might be a relevant present example.
So sure, a dividend proves the company has adequate short-term cash reserves to pay out the amount of the dividend...but that doesn't mean it's sustainable. And given the % of dividend received to the stock price, it's not that much comfort. It may prove it's not a total fraud, but that doesn't mean total future returns will be good as the stock price eventually falls in line with the falling earnings and ultimate dividend cut.
I know @jacob isn't advocating one ignore these other considerations, but along with the dividend yield, super simplistically you'd want some comfort that the payout ratio is sustainable via a sustainable revenue and cost situation...which ultimately gets back to my point that dividend yield is just a proxy for free cash flow, and used alone can lead you astray.
What Works on Wall Street is a great book and covers factor-based investing, but for individuals who are picking individual stocks I think that a very large focus on the yield to the exclusion of all else is highly problematic...as is very large focus on any single variable. Investing is a multivariate problem and I don't think anyone thinking clearly about it can come to the conclusion that 1-2 variables alone are enough to produce strong risk-adjusted returns when picking individual stocks (it works better in a more diversified group, as the book demonstrates through thorough study of long-term data).
Re: Investments Trade Log
I agree with everything that is written above.
My point was this:
When Tesla tells me they make X but then don’t disclose how much and where geographically (most of the profits are trapped in china), has a ballooning AR that is at odds with industry standards, includes all sorts of one offs and credits etc etc... let's just say I am not as confident.
My point was this:
When British American Tobacco tells me they make X amount of dollars in bottom line and consistently have paid out 80% of that amount in dividends, I feel comfortable they're not pulling an Enron.
When Tesla tells me they make X but then don’t disclose how much and where geographically (most of the profits are trapped in china), has a ballooning AR that is at odds with industry standards, includes all sorts of one offs and credits etc etc... let's just say I am not as confident.
Last edited by Seppia on Mon May 01, 2023 9:04 pm, edited 1 time in total.
Re: Investments Trade Log
If these are the criteria, a company cannibalizing itself by selling down its assets would be 'legit' as long as it consistently pays 80% of that out via dividends. My point is, the fact that a company board decides to move some funds from the company to shareholders doesn't prove that everything is good in that company - there are just too many ways this can be engineered without actual profits or cashflow that the additional feeling of safety added through paying dividends doesn't seem worth all the cons that come with them.
Re: Investments Trade Log
Sure, I also would discourage investing by blindly filtering “dividend yield” and “payout ratio” and buying the stocks without any research.
But let’s say all else being equal I take the dividend payer.
Everything has to be put into context and nothing is an absolute.
I could say “high levels of debt aren’t great” and one could respond “well what if company X locked in a 3% long term loan to buy a company that has a sustainable P/E of 5”
I mean, ok.
But let’s say all else being equal I take the dividend payer.
Everything has to be put into context and nothing is an absolute.
I could say “high levels of debt aren’t great” and one could respond “well what if company X locked in a 3% long term loan to buy a company that has a sustainable P/E of 5”
I mean, ok.
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Re: Investments Trade Log
Maybe the last hike now ... 5-5.25%
It's nice to finally have an alternative.
It's nice to finally have an alternative.
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Re: Investments Trade Log
Who had SPX still >4000 with interest rates at 5-5.25% on their bingo card? I certainly did not.
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Re: Investments Trade Log
Apple, which employs 90000 domestically, is now worth more than the entire Russell2000.
The Russell2000 is the smallest 2000 companies in the Russell3000, which includes almost all of the public US equity market.
The Russell2000 is the smallest 2000 companies in the Russell3000, which includes almost all of the public US equity market.
Re: Investments Trade Log
Indeed it does appear strange. I’m been essentially out of the market for unrelated non-investment reasons since late March. Have been considering deploying back in but happy to keep getting c. 4.7% in a MMA and just wait and see if there’s a better entry point.white belt wrote: ↑Wed May 03, 2023 4:47 pmWho had SPX still >4000 with interest rates at 5-5.25% on their bingo card? I certainly did not.
Re: Investments Trade Log
Thoughts on investing in companies that should see a large gain in profits from using AI / LLMs to minimize workforce / etc? Right now its looking like its on the edges of film production, special effects, voice acting, story production, etc, with tons of inroads to be made into tech firms as well. I forget whose journal was musing about NVIDIA and AMD stock but those would also see a huge gain from working on specialized AI / LLM chips (since all of AI is has an unending hunger for more compute)
Re: Investments Trade Log
If an entire given industry adopts AI, it won't bring its profits up, but rather its prices down (savings will effectively be passed on the clients). You'd have to predict a specific company that adopts AI better than its industry's average to profit off such investment.
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Re: Investments Trade Log
POLY owns various mines in Russia and Kazakhstan, mainly gold and silver. It has been trading on LSE for something like £16 / share in the two years preceding Feb 2022 which saw the share price tumble to around 2-3£ thereafter. Recent US sanctions against the Russian branch of the company gave it a further blow with the price falling to below £2 at times. These are prices unseen since POLY entering LSE in 2011. It has been recently voted for POLY to de-list from LSE and re-domicile to AIX next month, this way bypassing sanctions by Russia (the Russian sanctions are due to the company currently being registered in an unfriendly country that is Jersey). Further plans are those of divesting or otherwise cutting ties with the Russian part of the company (my understanding is selling these assets) and concentrating on the Kazakhstan assets. In a recent interview secondary listing on LSE has been hinted at. POLY was in FTSE100 before the price tumbled and it is not unreasonable to think some major players are invested in it. For one, BlackRock has been investing in it after the price drop. At present it is still possible to purchase POLY shares from some brokers in the UK who after de-listing are ready to keep the paper certificates on nominee's name in tax protected (capital gains and dividends) dealing accounts. Assets would then become largely non-liquid but any potential dividends would be received. Also, once POLY enters a stock exchange serviced by the broker, shares can again be traded.
Thoughts on whether this a cigar butt or otherwise underpriced value?
Thoughts on whether this a cigar butt or otherwise underpriced value?
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Re: Investments Trade Log
Dropped BA and DIS and bought CARR. Thinking air conditioning is gonna be big pretty soon.
I sold my NVDA four months too early. Sigh.
I sold my NVDA four months too early. Sigh.
Re: Investments Trade Log
Cathie Wood sold in January. So you are in good company.
Aswath Damordoran the value investor sold right after the recent run. Said he couldn't rationalize it anymore.
I thought about trimming but I just can't do it. This company just keeps on finding itself in the middle of things. The issue is my age. Do I have enough time to live through another dip and rebound.
Re: Investments Trade Log
@Henry
Why not “dollar-cost sell?” For instance, sell off chunks of your total shares on the way up. Sort of a compromise between the disposition effect and taking profits…can let some of it run.
And if it ever dips and already you did take some profits…you could buy back in again.
Why not “dollar-cost sell?” For instance, sell off chunks of your total shares on the way up. Sort of a compromise between the disposition effect and taking profits…can let some of it run.
And if it ever dips and already you did take some profits…you could buy back in again.
Re: Investments Trade Log
Sold NVDA @ $225 and $248
Damn that sucks
Damn that sucks
Re: Investments Trade Log
@Lemur
You are right. Have to mettle up for this. I would exchange for BRK.B most likely. And only in retirement accounts so no taxes right now.
If I bought all my stocks the way I bought NVDA I'd be Elmer Fudd rich. Bought on crypto dip and then again on gaming dip and then again at beginning of this year. Jensen Huang should be a household name.
You are right. Have to mettle up for this. I would exchange for BRK.B most likely. And only in retirement accounts so no taxes right now.
If I bought all my stocks the way I bought NVDA I'd be Elmer Fudd rich. Bought on crypto dip and then again on gaming dip and then again at beginning of this year. Jensen Huang should be a household name.
Re: Investments Trade Log
CNBC Headline - Cathie Wood builds a $47 million bet on META after exiting AI winner NVDA too early.
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Re: Investments Trade Log
Rate hike pause. But maybe more coming. (While inflation is dropping a bit, it's not dropping fast enough.)
Re: Investments Trade Log
Today I was prepared to sell NVDA. Stock is up $15PSF per share and at 52 Week high which is why I'm green today. Another time.
I've been buying VICI a REIT specializing in Vegas properties. Since starting the position, The Oakland A's baseball franchise is moving to Vegas. The Golden Knights just won the Stanley Cup. If you're going to bet, seems logical to bet on Vegas.
I've been buying VICI a REIT specializing in Vegas properties. Since starting the position, The Oakland A's baseball franchise is moving to Vegas. The Golden Knights just won the Stanley Cup. If you're going to bet, seems logical to bet on Vegas.